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Authors Rebecca Hellerstein, Deirdre Daly and Christina Marsh conclude that the sensitivity of U.S. import prices to changes in the dollar has been relatively unchanged in the past decade. The responsiveness of U.S. import prices to such changes, known as the exchange rate “pass-through” effect, has important implications for the U.S. economy because of the potential impact on consumer prices and inflation.

A number of recent studies point to a substantial decline in exchange rate pass-through over the past decade, suggesting that inflation in the United States is more resistant than in the past to a declining dollar, but the authors find no conclusive evidence of such a trend. The authors posit that methodological changes, including a revision in the collection of import price data and the inclusion of commodity prices in some pass-through models, may account for the discrepancy between their own findings and those of other researchers.

Hellerstein, Daly and Marsh conclude that there is not sufficient evidence to treat U.S. import prices as substantially less sensitive to a rise or fall in the dollar now than in the past.

Rebecca Hellerstein is an economist and Deirdre Daly a research associate in the International Research Function of the Research and Statistics Group; Christina Marsh, formerly a research associate in the Function, is a graduate student at the University of Minnesota.